ALEXANDRIA, Va. - Federally chartered credit unions would be required to report the annual compensation of their senior executives to members under a proposal issued by NCUA last week.
The proposal tries to satisfy some of the criticism aimed at credit unions over transparency on executive pay, but would fall short of current requirements for both state-chartered credit unions and publicly owned corporations that are required to make such information available to the general public.
NCUA said it would only require executive compensation be disclosed to members, either in annual reports or on websites, because it is only the members that the executives are responsible to, according to NCUA Board member Gigi Hyland, explaining recommendations in the NCUA Outreach Task Force, which she chaired.
A Secretive Process
The disclosure of executive compensation, long a secretive process among credit unions, was cited by the government accounting office in a study on credit unions two years ago that suggested that credit unions be required to make more information available on executive pay.
State-chartered credit unions are currently required to disclose the compensation to top executives in IRS tax Form 990s that until recently were aggregated by state credit union regulators. But federal charters are exempt from that requirement.
Publicly traded corporations are required under the Securities and Exchange Act to disclose the executive compensation in annual proxy statements filed with the SEC and available to the public.
The task force also recommended the expansion of NCUA’s Member Services Assessment Pilot, which collected information on how well credit unions serve their fields of membership, by making it permanent.
NCUA would also collect information on what products and services each credit union offers, under the proposal.
The Task Force study was an outgrowth of congressional inquiries into how credit unions serve the underserved. In an initial response to Congress, NCUA arbitrarily studied 450 credit unions in its MSAP in 2005 on provided general information on the economic level of credit union members. The study issued last week proposes that NCUA expand that effort and collect the data every year.
Release of the report comes as Congress begins debate on whether to expand the Community Reinvestment Act beyond banks and thrifts to include credit unions and other entities. However, the annual collection of data based on the geocoding of credit union members, as was conducted under the MSAP, is not expected to satisfy the critics of credit unions who are calling for Congress to apply CRA to the industry.
But the Task Force decided against requiring credit unions to collect data on their own detailing actual member economic levels because of avid opposition from credit unions, according to Hyland. Credit union representatives objected to the “burden” of such data collection and worried about how it would be interpreted, she said.
Credit unions have been fighting efforts to collect data assessing their services to the underserved for years. An effort by former NCUA Chairman Norm D’Amours to enact a CRA-like requirement that all community charters provide such data created a massive fight with the trade associations, who eventually convinced the NCUA Board to repeal D’Amours proposal.
Data Collection Issue Expected To Resurface
The data collection issue is sure to resurface as increasing numbers of credit unions opt for community charters. The number of community charters among federal credit unions has more than doubled since 2000 to over 1,000 and a third of all members in federal credit unions now belong to a community charter, according to the Task Force report.
The recommendations must be approved by the NCUA Board, which is likely to give its approval, given all three board members’ public positions on these issues.
The Task Force report, which includes a total of 12 recommendations, was complied after six town hall-style meetings conducted around the country by the group that were attended by credit union trade associations, industry executives and consumer groups, according to Hyland.
